UPDATE 1-U.S. Treasury says cost of financial-rescue down

WASHINGTON Feb 11 (Reuters) - The U.S. Treasury Department
on Monday lowered its estimate of the ultimate cost of its
financial rescue fund to $55.48 billion from $59.68 billion,
reflecting a better-than-expected return on its bailout of
General Motors.

The latest tally means that about 93 percent of the $418
billion in funds already disbursed to date from the $700 billion
Troubled Asset Relief Program, or TARP, have been recovered.

TARP, unveiled during the 2007-2009 financial crisis,
created programs to help stem foreclosures, revive consumer and
business lending, and rescue U.S. auto makers. The latest
downward revision on TARP's cost was due in part to money it
raised from stock sales of the remaining shares of General
Motors it owned.

In December, Treasury announced a two-step plan to sell its
stake in GM over the coming year, a process that includes a $5.5
billion stock sale to GM as part of a broader push to wind down
the financial bailout.

In its estimate, the Treasury projects that the auto
industry bailout cost was reduced by $4 billion, or 16 percent,
to $20.3 billion from a previously projected $24.3 billion.

The Treasury also said it held auctions in January for its
outstanding preferred stock and subordinated debt in 11
financial institutions to wind down TARP investments that
benefited many banks during the financial crisis.

But seven of those banks did not make the obligated payments
due under the TARP terms, which led to steep discounts on the
auctioned holdings.

As a result, the Treasury received less in the way of
proceeds from the sale of the preferred stock and debt. It said
it would receive $191.3 million in proceeds from those auctions,
compared with an original $285.3 million TARP investment.

So far, the government has recouped about $268 billion from
its bank bailout initiative through repayments, dividends,
interest, and other income, the Treasury said, compared to the
$245 billion invested in those institutions.